Why Canadian Retail Is Going Online & What That Means

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By Patrick Foster

The story of Canadian ecommerce has been a very interesting one indeed. While online retail swept into dominant positions in big countries across the globe, the Canadian market was quite reluctant to move with the times, leading to a significant developmental lag. Various reasons for this have been floated, but whatever the cause was, things have finally changed.

Today, the ecommerce industry in Canada is in the midst of a major boom, and the coming years should see yet more retail move into the digital world. But why is online retail now finding some purchase, and what does it mean for the country? Let’s investigate.

Canada’s odd ecommerce lag

Given the size and general advancement of Canada, you’d think that it would have taken up ecommerce around the same time the United States did, but no. Relative to other large nations, it has been slow to embrace the new retail model. It would be unfair to use the U.S. as a sole point of comparison because the population difference is so immense and it’s the home of Amazon, the company that practically owns ecommerce — but we can add the United Kingdom for a fairer comparison.

Going by this direct three-way study from 2015, we can see that both the U.K. and the U.S. were massively outperforming Canada when it comes to online trade. In fact, going purely by spend per citizen, the U.K. was in the lead (possibly due to its density). So why the difference?

The slow progress of Amazon in Canada

Well, I think it’s fair to identify the main reason as Amazon’s incremental inroads into Canada. Amazon’s UK site launched in 1998, but its Canadian site didn’t launch until 2002 — and while Amazon Prime launched in the U.K. in 2007, it didn’t reach Amazon.ca until 2013. Concerned about the prospect of Amazon pricing out local businesses, Canadian provinces were slow to allow any progress.

What’s so special about Amazon? Perhaps nothing inherently, but it’s widely functioned as a game-changer. When Canada was a nation dominated by brick-and-mortar retail, there wasn’t so much incentive for any one company to introduce its customers to the ecommerce model — doing so would essentially have invited the erosion of their main business model.

But now that Amazon has established a meaningful foothold in Canada and is making more of its services and products available in the north, the genie is out of the bottle, and it isn’t going back in. As a result, traditional retailers are being forced to adapt to the digital world or imminently perish.

To a large extent, you can view this as a natural and inevitable correction. Unique circumstances saw a tech-savvy nation with robust shipping infrastructure resist incursion from foreign retailers and thus extend the lifespan of the brick-and-mortar setup, but sooner or later a tipping point was going to be reached. Now that Canadians are familiar with the convenience of ecommerce, it’s only going to get bigger.

Trying to combat overseas dominance

The next decade is going to be extremely interesting for the Canadian online retail industry. Though it still lags behind most of the rest of the world, it looks like businesses are increasingly realizing that they need to put in the work to catch up. After all, the worry is that leaving it too late will allow international retailers like Amazon to saturate the ecommerce marketplace and see huge amounts of revenue drain from the Canadian economy.

A survey of top Canadian executives late last year found that they were worried about the threat of foreign retailers but also bullish about the prospect of aggressive adoption of digital strategies. You can understand the concerns, because one look at the ecommerce stats from 2016 shows the dominance of U.S. companies. Canadian companies are so behind the curve that it may be some time before they pose any threat to the industry juggernauts.

Years after fighting the advance of Amazon, Ottawa is now considered Canada’s tech hub — Shopify took its build-your-own-store ecommerce system to massive success from its headquarters there — and it currently houses some promising tech firms that show a lot of potential (some examples here). But there’s really no way of knowing if the coming years will give rise to a native Canadian ecommerce store capable of competing with the top dogs. Unless someone can rival Amazon’s convenience, that battle may already be lost.

What this all means

As we’ve seen, now that the ecommerce model has found a foothold in Canada, it isn’t going to be dislodged. For consumers, this is very good news — conventions such as free shipping or same-day delivery should continue to spread, and prices will become more tempting as more retailers move online and strive to win business.

For Canadian retailers, though, the ecommerce revolution will continue to be a trial by fire. Those that don’t have online stores will need to invest heavily in changing their operations or finding unique ways to offer things that customers can’t get online. It’s a challenging time, but also one rich with opportunities — businesses that commit to innovation will find the Canadian marketplace a very supportive environment for growth.

Canada is an advanced nation of internet users, but circumstances conspired to slow the progress of its retail system for a time. Today, the dam that held back the tide has long since burst, and Canadian consumers are embracing online retail in a big way. While Canada’s ecommerce industry still lags behind, its current growth predicts a big future — one that can be good for consumers and retailers alike.

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Patrick Foster is an expert writer from Ecommerce Tips — an industry-leading ecommerce community that shares the latest insights from the sector, spanning everything from business finances to content marketing strategies. Check out the latest posts on Twitter @myecommercetips.

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